Earning ADA through MILK

Hello everyone :wave:t2:

I would like to take advantage of the forum launch for dropping my ideas about the favorite utilities that I would like to see for the MILK token :milk_glass:

What I think should be implemented is a mechanism for sharing a part of the fees earned by the DEX with MILK users, like dividends for the stock market. I will detail why this is a great idea below.

Currently, MuesliSwap is the cheapest DEX of the Cardano ecosystem so a little increase in the fees would not negatively impact its attractiveness. Let us say 0.05 ADA per transaction, plus 0.1% of the transaction volume for all the transactions from the orderbook, the instant swap, the Milkomeda AMM, the limit swap, and so on…

According to CoinMarketCap data, MuesliSwap daily volume is of the order of $ 20,000 (by comparison, SundaeSwap is currently sitting at about $ 70,000 - 100,000). Assuming that SundaeSwap accounts for 50%+ of all Cardano transactions, the daily volume of all Cardano DEX transactions should be of the order of $ 150,000 - 200.000. Now. In a bear market. Before mass adoption.

Fast forward of 12 - 24 months. I believe it’s not blasphemy to think that the daily volume could increase by a factor of 10 - 20×, at least. In my opinion, the increase will probably be larger. This would bring the daily transacted volume of the whole Cardano ecosystem to a few million ADA per day (by comparison, the daily volume of the 50th biggest DEX is of the order of $ 2.5 M). Given how easy and convenient the instant swap functionality is, it is reasonable to think that MuesliSwap could transact a daily volume of 1+ M ADA (I am counting both the transactions within the DEX and those handled by the Instant Swap function).

1 M ADA / day × 365 days × 0.1% fee ÷ 10 M MILK = 0.0365 ADA / MILK of fees

Now let us add the transaction fees of 0.05 ADA. With an average transaction value of 100 ADA, that would be 10,000 tx / day.

10,000 tx / day × 365 days × 0.05 ADA / tx ÷ 10 M MILK = 0.01825 ADA / MILK of fees

Summing together the two numbers, we obtain a yearly interest of 0.05475 ADA / MILK, which perfectly matches the amount of ADA that you would get by staking 1 ADA for the same amount of time. I swear this was not intended, it simply came out :joy:

Now, if I wanted to be the moon boy of the situation, I could play with numbers and tell you: “Yeeeah! Look how much money you’d make if MuesliSwap had Uniswap volume!”. I will not do it because we really don’t know when (or even if) such numbers will be reached, so let’s keep our feet stuck to the ground and consider a more modest scenario :smiley:

~0.055 ADA / MILK / year would make MILK less attractive than ADA because it’s a ROI of ~2% at the current price of ~2.25 ADA / MILK, and even less for higher prices, of the order of 5, 8, or 10 ADA. But there are more aspects that should be considered.

First, it would be hella cool to earn ADA while keeping MILK staked in a pool. This would result in MILK owners to simultaneously earn various tokens and ADA for their staking.

Second, not all the MILK tokens would be staked. Tokens blocked by developers for future distributions and tokens in liquidity pools / orderbooks / CEXes would not be, and this would shrink the denominator of the previous equations, thus increasing the ROI.

With 5 M MILK tokens staked, the interest would be ~0.11 ADA / MILK / year, which, with a price of 2.25 ADA / MILK, would lead to a ROI of the order of 5% on the capital (less if the price increases, more if the transaction volume increases, or the fees), plus the extra tokens of course. This would make sure that holding MILK would be just as profitable as holding ADA, but with many advantages that ADA alone does not offer.

And now something even cooler: if you don’t claim your rewards, your ADA could be staked as well, thus leading to a very nice interest compounding.

Now let us dig into more advantages.

The previous calculations were obtained by merely assuming that every MILK token should receive the same share of the rewards. Actually, this should not be the case. In order to encourage engagement, rather than speculation, the rewards should increase with the duration of the staking period (just like in ISPOs you get bonus tokens if you hold for specific numbers of epochs), and extra rewards could be granted to people using their MILK for voting new proposals (Catalyst anyone?). This would ensure that real supporters got more benefits than traders.

Moreover, since we would all love to see our MILK tokens gain value, it could also be nice to implement a form of “buyback program”. For example, if you had to claim 10 ADA of rewards, it would be nice if you could choose whether to get them in ADA or in MILK. In the latter case, the system could trigger the instant swap function and give you as many MILK as it could buy with 10 ADA (and the extra ADA that were not matched). This would increase the demand, hence the price.

I think this would make MILK the most interesting token of the Cardano ecosystem because it would allow you to get a yield possibly much higher than ADA staking, and without incurring in impermanent loss.

This is the first of many ideas that I have. I hope it will be found useful :blush:

Thank you if you read till here :hugs:

11 Likes

yup i agree with this and thumb ups

my reasoning is dividends like stock, make the token utility worth something.

As we know when we farm any defi we just dump and price keeps going down

2 Likes

You cannot charge for the instant swap. Anybody can create an aggregator that compares prices across multiple dex’s. The moment our aggregator (instant swap) has a fee, someone will create one without fees and get the traffic themselves by people looking for this kind of tool.

1 Like

I think your general idea is good for milk holders. Encourage buying and holding of the milk currency, at least as good as ada holding
The rewards Will come from fees/staking/staking rewards in ada from Liquidity & More opinion…

Love the initiative , and i would love to earn some ada by staking milk! Lets do This!!

I agree with this. As the ecosystem pays for itself and the great team, some ADA could be set aside to pay holders, more especially those MILK holders that participate in the ecosystem, whether as users or governance participants. Milk holders are the decentralized fed governors.

If one incentivizes participants we can already tell the results, it will be big.

Great ideas. Perhaps the Babel fees structure would enable Milk to be used as a fee for transactions.

1 Like

Here’s another suggestion to earn ADA through Milk without increasing the fees. Today with V2, to be a matchmaker, you need a license. Let’s say we need 20 matchmakers for the system to operate properly and have enough decentralization without diluting too much the matchmaker earnings (just a random number, could be 50 or 100). We can decide to auction half of the matchmaker licenses through Milk staking (top 10 wallets staking Milk in a specific matchmaker staking pool) and they keep all their earnings for themselves like it’s the case today (so we have less Milk in circulation because of this stake, and we create demand for matchmakers to buy and hold Milk) and the other half we give them to matchmakers willing to share their earning with Milk holders, and of course we vote for these matchmakers based on the percentage they are willing to share. A matchmaker in V2 can match an order from order book, AMM, and even other DEXes, so we are not talking about 0.1% here but could be even 1%-5% depending on different arbitrage opportunities available between DEXes and also available today between the orderbook and AMM (on Milkomeda) I think the ROI will much higher with extracting value from matchmaker earning than increasing the fees

3 Likes

Thank you everyone for stopping by and dropping your comments and ideas :smile:

It appears that my ideas were appreciated, so I would like to articulate a bit further my thought.

First, let us start with the instant swap function. I don’t think it would be harmful to add such a small fee as the one that I have proposed. Let us quantify its impact. For a swap of 100 ADA, it would be 0.06 ADA, which simply disappears when compared to the rest of the fees (0.95 ADA for MuesliSwap, more for other exchanges, plus the ~0.17 ADA for the transaction). Personally, I would pay even more for a useful feature, and I think many others would. Otherwise, it would not be explained why SundaeSwap has a much higher volume than MuesliSwap, given its higher fees. In my opinion the user experience, the engagement, and the trust in the developers win over the fees.

Such a tiny fee would also serve another purpose: rewarding the developers (who hold MILK, by the way) for directing traffic to other exchanges. I think they deserve it. Of course, I am not suggesting to implement it right now, but it could be an option for the future (maybe when our community is a million strong), just as it was done with the DEX fees, which were non-existent in the beginning.

The second comment that I would like to address is the one about V2 matchmaker licenses. I think it’s an excellent idea! Possibly, the best use case for MILK, which would make us unique :muscle:t2:

Another stream of income originated by the AMM could be possible to stake the ADA (and other tokens) delegated to liquidity pools, and to share the rewards between MILK holders. For example, in case of 50 M ADA delegated to liquidity pools there would be 5 ADA per MILK. Hence, this would make MILK a better investment than ADA for any price cheaper than 5 ADA / MILK, which brings me to the end goal…

The end goal should be to have an APY higher than ADA :moneybag:

As long as MILK APY is higher than ADA, the buying pressure will exceed the selling pressure. Conversely, if the APY is low, or not determinable, long-term holding would be discouraged. I could simply buy MILK and wait for it to pump to 10, 20, or 50 ADA per token when some good news coms out, and then dump it because it would be more profitable for me to simply stake ADA.

Paying “dividends” in ADA would make it a very interesting investment, because it would give you a predictable return from sustainable sources and without impermanent loss, and people first come for the money, then stay for the community :blush:

1 Like

That’s actually the best of the suggestions I have heard to date. We should try to “promote” it to the team, very original idea, can set us apart from the rest of the dexes!

One thing the team could do to add to the different income stream to provide reasonable APY e.g. >4.0% is to stake the ADA locked in the smart contract (AMM + order book), and parts of the ADA staking rewards given to the MILK stakers.

Yeh I really like the idea of earning ADA by farming or adding liquidity to MuesliSwap

Similar to how MinSwap have just released that feature allowing ppl to earn ADA rewards on Min farms

This Is A Great proposal. I suggest the team implements this as utility for holders holding Milk.